Merrill Lynch has landed a San Franciso-based financial advisor from Morgan Stanley. Nandi Gunning, who managed $430 million at Morgan, joined Merrill Lynch’s private wealth management business, which caters to high-net-worth clients. According to the firm, the former CMW Group is now the CWMG Group with the addition of Gunning. The team includes advisors Anthony Canini, John Myers, and Andrew Wages. The CWMG Group also includes five support staff and is based in San Francisco and Columbus, Ohio. It oversees $2.5 billion in total. Gunning got her start at Morgan in 2014. She was drawn toward Merrill’s capabilities in banking, lending, and trust offerings. She also liked the idea of switching from running her own practice to working on a team. As part of a statement, she wrote, “While everyone has unique gifts, the power of teams is bringing together individual skills and talents, diverse perspectives, and vast experience to serve a common purpose. Diverse teams have a broader, more comprehensive view, and the more perspectives the better.” Merrill had previously landed a $1 billion team from Citi earlier in the month.

Finsum:Morgan Stanley advisor jumps ship to Merrill, drawn by the firm’s banking, lending, and trust offerings and the chance to work as part of a team.

Wavertown, a discretionary fund management firm in the UK, is currently pulling in net inflows of £100mn per month from financial advisors, with 85% going into model portfolios. Waverton attributes the growth in demand for its models due to the structural shift in the advice market towards outsourcing portfolio management. In 2020, the firm also noted an uptick in demand for real assets exposure and absolute return strategies from advisors and clients. Currently, more than 30 percent of assets in the model portfolios are allocated to those asset classes. The firm, which has assets under management of £8.6bn, works with 500 advice firms in the UK and offers a range of model portfolios. The firm is noteworthy for the fact that, unlike many other providers, Waverton does not allocate to external funds. Instead, it invests directly in equities, bonds, real assets, and absolute return funds. The firm started as JO Hambro Investment Management and was owned by Credit Suisse from 2001 to 2013. A private equity-backed buyout took place and the firm then renamed itself Waverton in 2014.

Finsum:A structural shift in portfolio management outsourcing has increased the demand for model portfolios driving inflows for a UK-based Wavertown.

According to findings from Janus Henderson Investors’ 2022 Retirement Confidence Report, self-directed investors appear to be tightening their budgets amid rising inflation and market volatility. The report found that 86% of survey respondents are concerned or very concerned about inflation and 79% are concerned or very concerned about the stock market. However, despite these concerns, only 13% of investors have moved money out of stocks or bonds and into cash. Instead, almost half of the respondents said they have reduced their spending or plan to reduce spending as a result of the financial markets and rising inflation. The report also noted that women reported greater concern about the stock market than men, but no gender-based difference was found regarding inflation. Another noteworthy finding from the report was that investors still in the workforce were more worried about the stock market and inflation compared to retirees. This can be attributed to the many uncertainties associated with how their household budgets could change in retirement.

Finsum:A recent report found that investors are tightening their budgets, but not moving to cash amid the current rising inflation and market volatility.

While institutional investors are allocating more to alternative investments, recent analysis has shown that the asset class does not help boost returns. Public Pension Investment Update: Have Alternatives Helped or Hurt? was run by the Center for Retirement Research at Boston College (CRR). It found that the investment performance of public pension funds from 2001 to 2022 averaged only 5.9%, despite increasingly larger allocations to private equity, hedge funds, real estate, and commodities. CCR looked at the returns for broad indices of alternatives and traditional equities before, during, and after the Financial Crisis. It found that alternatives substantially outperformed traditional equities from 2001 to 2007; and other than real estate, alternatives lost less than equities during the financial crisis. However, Jean-Pierre Aubry, associate director of state and local research at CRR and the brief’s author wrote that “Since the crisis, the performance of alternatives has been more mixed, with private equity and real estate rebounding somewhat, while hedge funds and commodities continue to provide lower returns.”

Finsum: A recent brief found that alternatives have not helped public pension performance due to mixed performance since the financial crisis. 

According to research from JPMorgan, the shift from actively managed funds to passive index-tracking funds has accelerated this year. The move has been boosted by a jump in flows to bond and mixed-asset funds. The share of assets under management held in U.S. passive bond and hybrid funds rose from 23% of all equivalent U.S. fund assets at the end of 2019 to 28.5 % by August 2022. Peter Sleep, senior portfolio manager at 7 Investment Management told Financial Times that “Bond exchange-traded funds were now catching up with their more broadly adopted equity ETF counterparts as the offering had broadened and become more cost competitive.” Jane Sloan, head of iShares and index investing Emea at BlackRock, added that “Half of all inflows into global ETFs this year had been into bond ETFs.” She also noted that “More people are using ETFs to trade bonds as they move within fixed-income asset classes.” This explains why trading volumes in bond ETFs are up 35% since 2020 and 2021. Tax loss harvesting is another reason for the shift as it provides an incentive for investors to sell out of their actively managed fixed-income funds.

Finsum:Due to a combination of tax loss harvesting, ETFs becoming more cost competitive, and an increase in bond ETF trading, the shift from active to passive bond funds is accelerating.

According to fund managers, investors are pouring money back into U.S. corporate credit due to a combination of higher yields and attractive valuations. Salim Ramji, global head of exchange-traded funds and index investments at BlackRock told the Reuters Global Markets Forum, "We are at the beginning of a rotation as investors come back into credit. With the rapid move in front-end rates, the curve has repriced credit to attractive levels." This has benefited fixed-income ETFs such as the iShares iBoxx Investment Grade Corporate Bond ETF (LQD) and the iShares High Yield Corporate Bond ETF (HYG), which are on track for quarterly gains in the fourth quarter after falling 20% and 14% respectively this year. Jim Leaviss, chief investment officer for public fixed income at M&G Investments added "We don't know exactly when the peak in inflation will be, but I think that's not a million miles away. If we're at this turning point then the entry-level you get by buying investment-grade credit in the (United) States looks really attractive." Ramji also said that “The jump in bond yields has also made corporate credit more attractive to investors looking for income after years of low-interest rates.”

Finsum:A combination of attractive valuations and higher yields has made U.S. corporate credit ETFs more enticing for investors. 

Over the past year, direct indexing has become a hot topic in the financial media. It’s hard not to see why with firms such as Fidelity and Vanguard launching direct indexing solutions. But direct indexing is not a new investment product. In fact, Natixis launched Active Index Advisors Strategies, its direct indexing business, in November 2002 with the AIA S&P 500® direct indexing strategy. The strategy has grown from $4 million in assets under management to nearly $8 billion today. Even more impressive is that the AIA S&P 500® strategy has tracked its benchmark index to within 12 basis points annualized since inception, outperforming on an after-tax basis by over 370 basis points on an average annualized basis. The strategy seeks to outperform on an after-tax basis while providing a pre-tax return similar to the S&P 500 Index. The firm’s direct indexing solutions provide fully customizable SMAs that can be customized for tax purposes, align with investor values such as ESG, or tilt towards factors.

Finsum:Amid a recent push by financial firms to launch their own direct indexing solutions, Natixis celebrates the 20th anniversary of its first direct indexing strategy. 

According to Wink’s Sales & Market Report, third-quarter sales of deferred annuities soared almost 21% over the prior-year quarter. Deferred annuities include variable annuities, structured annuities, indexed annuities, traditional fixed annuities, and multi-year guaranteed annuities (MYGA). Indexed annuities saw the largest gains. Sheryl Moore, CEO of Wink, Inc. and Moore Market Intelligence said that "It was a record-setting quarter for indexed annuity sales. In fact, 2022 will be a record year for indexed annuities as well." Total non-variable deferred annuity sales, which include indexed annuities, traditional fixed annuities, and MYGAs, came in at $48.8 billion for the quarter, up 67.1% compared to the prior year's quarter. However, variable deferred annuities, which include structured annuities and variable annuity product lines, did not see the same gains. While sales came in at $23.5 billion, that figure was down 10.8% compared to the previous quarter and down more than 23% compared to the same quarter last year. The No. 1 selling deferred annuity for the quarter was Jackson National’s Perspective II Flexible Premium Variable & Fixed Deferred Annuity. 

Finsum:With indexed annuity sales leading the way, total deferred annuity sales soared year over year. 

Thought Taylor Swift was all the rage? Okay; fair enough, especially if you ask Ticketmaster.

But she’s going to have to scoot over. In the financial industry, succession planning’s become all that and more, according to diamond-consultaants.com. Not only that, when it comes to the movement of advisors its propelled into a primary driver.

Programs like Merrill’s CTP (Client Transition Program), Morgan Stanley’s FAP (Former Advisor Program), and UBS’s ALFA (Aspiring Legacy Financial Advisor) Program, have been formulated by most wealth management firms. As a result, senior advisors can call it a day in place and the next gen, over time, can assume the reins of the business.

With succession planning, of course, employees are recruited and developed, according to corporatefinanceinstitute.com. The intent: to fill a role – a key one, at that – with an organization. What it does is rachet up the availability of employees who’ve not only been around the block, but competent, to boot. They’re up to the task of supplanting members of the old guard who’ve oh, say, left, retired or passed away.

Succession planning circumvents the potential of creating a hole in leadership in the aftermath of a retirement or departure of an organization’s senior officer.

Based on a recent report from the Alternative Credit Council, the private credit affiliate of the Alternative Investment Management Association, private credit managers remain bullish on their business prospects heading into the new year. In fact, more than 80 percent of global private credit managers are either bullish or cautiously optimistic about the market’s prospects over the next 12 months. The report was based on a survey of 54 private credit managers with $805 billion in combined assets. The optimism comes at a time when more investors are looking to increase their allocations to private credit next year. This was highlighted by a recent survey by Ernst & Young. According to the report, many private credit managers are taking advantage of this tailwind by expanding into new geographic locations. The report said, “Much of this growth is being led by the private equity market, which continues to spearhead private credit’s expansion into new markets. This development is likely to prove valuable for the European and Asian economies as they seek to diversify the sources of financing available to borrowers.”

Finsum:Due to an increase in interest from investors, private credit managers are optimistic about their business prospects heading into the new year.